Toronto, Ontario -- Exceptionally high total-loss rates are driving down profits for Driven Brands -- as well as the collision industry at large, the company reported during its third-quarter investor call.
“The industry overall is facing some headwinds,” chief executive officer Danny Rivera told investors. “You’re seeing total-loss rates at historic highs.”
The Charlotte-based owner of CARSTAR, Maaco, Meineke, Take 5 and Auto Glass Now posted revenue of US$535.7 million for the quarter ended Sept. 27, a 6.6 percent increase from a year earlier. System-wide sales climbed 4.7 percent to about US$1.63 billion, while same-store sales rose 2.8 percent and store count grew 3.5 percent.
Net income from continuing operations was US$60.9 million, or US$0.37 per diluted share, compared with a loss of US$11.5 million, or US$0.07 per share, last year. Adjusted net income increased to US$56.2 million, or US$0.34 per share, from US$38.1 million, or US$0.23 per share, while adjusted EBITDA grew to US$136.3 million.
Driven Brands said its collision and glass businesses also faced pressure from a reduction in the number of repairable claims, conditions that have persisted across the insurance industry as ADAS has proliferated in vehicles.
He said the company’s diversified portfolio helped offset those impacts.
“Same-store sales increased for the 19th consecutive quarter, with high single-digit growth in Take 5 driving solid gains in revenue, adjusted EBITDA and adjusted earnings per share,” Rivera said.
“While the consumer environment remains dynamic, our resilient, needs-based model and disciplined focus on execution position us well to continue delivering long-term shareholder value.”
The Take 5 oil-change business generated system-wide sales of US$411.6 million across 1,282 locations, with same-store growth of 6.8 percent. The franchise division, which includes CARSTAR, Maaco and Meineke, posted system-wide sales of US$1.09 billion across 2,676 locations and a percentage point increase in same-store sales.
Driven Brands ended the quarter with total liquidity of US$755.7 million, including US$162 million in cash and US$593.7 million in available credit. Its net leverage ratio improved to 3.8 times adjusted EBITDA.
The company narrowed its full-year outlook to revenue between US$2.1 billion and US$2.12 billion, adjusted EBITDA of US$525 million to US$535 million and adjusted diluted earnings per share of US$1.23 to US$1.28. Same-store sales growth is expected at the low end of the one-to-three-percent range, with 175 to 200 new locations added by year-end.
Rivera said the company would continue to focus on efficiency and brand performance across its network. “We are confident that the investments we are making today will strengthen our competitive position and drive long-term growth,” he said.
"While the consumer environment remains dynamic, our resilient, needs-based model and disciplined focus on execution position us well to continue delivering long-term shareholder value,” Rivera concluded.
